Jonathan Lane, comments on the wheat market

Global markets have traded to record highs on concerns of declining export availability and continued import demand, supporting UK futures which hit £245 for May 22 midweek.

The impact of the storm damage to Vancouver’s rail links is expected to be significant and will have a cascading effect back into the prairies.

Badly timed rains are also hurting Australian wheat quality at a time when the world needs it most, with a possible 20-25% of the total crop being downgraded to feed quality.

The likelihood of export restraints in other exporting regions continues. Russia’s wheat shipments are down 18% on the year (as of 18 November) to 17.2mln t. 

Ukraine’s government is not currently planning any wheat export curbs, but the country has already shipped 52% of seasonal export volume, or 14 mln t, this season.

In Kazakhstan, harvest is complete. However, grain yields were down 20% to 16.4mln t due to unfavourable weather conditions.

Meanwhile, Iraq’s agriculture ministry has warned of a 2mln t deficit in wheat production this year amid a severe water shortage. 

The International Grains Council cut its forecast for 2021/22 global wheat production by 4mln t to 777mln t, mainly as a result of Iran’s announcement.

Strategie Grains tightened its EU export outlook by 1.6mln t as Argentina and Ukraine have become more competitive. EU exports reached 10.3mln t as of 21 November, up 4% on the year, although data from France remains to the end of July.

UK wheat imports had reached 627,000t at the end of September according to latest official figures, down 15% on the year but in line with trade expectations. Exports are reported at just over 91,000t as increased UK competitiveness allowed more shipments in September, mainly to Spain and Portugal.

UK futures eased back Thursday but remain underpinned by the need globally to curb demand. This will require higher prices, which will filter down to support UK ex-farm values. 

Looking to new crop, the AHDB’s early-bird survey pegged the wheat area for the 2022 harvest at 1.81mln ha, up just over 1% from Defra’s June survey, projecting a crop of around 15.0-15.5mln t.

However, current prices of least £200 ex-farm in most areas for 2022/23 allow growers to lock in decent margins, despite higher input costs.

France’s new crop has also got off to a good start with 93% of the intended wheat area drilled by mid November and 99% of that deemed either in good or very good condition.

Will Ringrose,comments on the OSR market

The US soybean harvest is estimated at 95% complete, almost matching the five-year average.

Soybean export sales will be announced on Friday, but the trade expects no major changes from last week which showed a 27% decline on last year. On Wednesday USDA announced a 330,000t sale to an unknown destination and 30,000t of soy-oil to India.

China remains out of the market for the time being, although there were rumours of some unreported cargoes trading last week. 

In South America, the weather looks favourable. Ag Rural consultancy estimates Brazilian soybean planting at 86% complete, five points behind last year, while Argentina’s progress is put at 28.6% planted, close to 2020. It has been rumoured the Argentinian government will look to raise export taxes. 

Malaysian palm oil markets are still volatile. They traded down 2% at the start of the week following concerns of renewed EU lockdowns, but recovered just over half of that loss on Wednesday as Malaysian exports picked up.

In Australia rain continues to fall heavily in some regions causing disruption to harvest.

Canadian canola hit a new contract high following soy-oil higher in the session, trading back above $1024. StatsCan will release its next crop update on 5 December, which may reduce the crop further. CP rail announced that services through parts of British Columbia may resume as early as this week, but some observers believe this is optimistic.

Despite firmer oil markets, last Friday afternoon Matif rapeseed closed €16.5 down on the day. The market has been volatile ever since, trading back up on Monday, before taking those gains back on Tuesday. EU imports are estimated at 1.7mln t behind last year, which failed to offer support. Cold weather in the Ukraine will be watched carefully, especially in regions where crops in some areas have only just emerged.

UK prices are still trading slightly below season highs. Sterling remains at 1.19000.